Insurance & Risk Management Qualification related questions

What is the primary purpose of insurance? A) To eliminate risk B) To reduce financial uncertainty and make accidental loss manageable C) To increase profits D) To provide investment opportunities Answer: B) To reduce financial uncertainty and make accidental loss manageable Which principle of insurance means that the insured can only be compensated for the actual loss and cannot make a profit from a claim? A) Indemnity B) Subrogation C) Insurable Interest D) Utmost Good Faith Answer: A) Indemnity What is the term for the amount paid periodically by the insured to the insurer for covering risk? A) Claim B) Premium C) Deductible D) Policy limit Answer: B) Premium Which type of insurance provides payment to the policyholder in the event of a covered life event, such as death or disability? A) Property Insurance B) Liability Insurance C) Life Insurance D) Health Insurance Answer: C) Life Insurance What is the process called when an insurer seeks reimbursement from a third party who is responsible for a loss? A) Indemnification B) Subrogation C) Underwriting D) Reinsurance Answer: B) Subrogation What is the term for the initial amount that must be paid by the insured before an insurance company will pay a claim? A) Premium B) Deductible C) Copayment D) Policy limit Answer: B) Deductible Which type of risk can be mitigated through diversification? A) Systematic Risk B) Unsystematic Risk C) Speculative Risk D) Pure Risk Answer: B) Unsystematic Risk What is the term for a risk management technique that involves purchasing insurance to transfer the risk to another party? A) Risk Avoidance B) Risk Retention C) Risk Transfer D) Risk Reduction Answer: C) Risk Transfer Which insurance principle requires that the insured has a financial interest in the subject of the insurance policy? A) Utmost Good Faith B) Proximate Cause C) Insurable Interest D) Indemnity Answer: C) Insurable Interest What type of insurance protects businesses from losses due to events that may occur during the normal course of business? A) Life Insurance B) Liability Insurance C) Property Insurance D) Business Interruption Insurance Answer: D) Business Interruption Insurance Which risk management technique involves taking actions to reduce the severity or frequency of losses? A) Risk Avoidance B) Risk Retention C) Risk Reduction D) Risk Transfer Answer: C) Risk Reduction What is the term for a legally binding contract between an insurer and an insured? A) Premium B) Deductible C) Policy D) Claim Answer: C) Policy What is the main role of an underwriter in an insurance company? A) To sell insurance policies B) To manage claims C) To assess risk and determine premiums D) To handle customer service inquiries Answer: C) To assess risk and determine premiums Which type of insurance protects against damages to another person’s property or bodily injury in an accident? A) Health Insurance B) Liability Insurance C) Property Insurance D) Life Insurance Answer: B) Liability Insurance What is the term for the maximum amount an insurer will pay for a covered loss? A) Premium B) Deductible C) Policy limit D) Copayment Answer: C) Policy limit What type of insurance covers the risk of financial loss from death, severe injury, or illness? A) Liability Insurance B) Health Insurance C) Life Insurance D) Property Insurance Answer: C) Life Insurance What is the principle that ensures that insurers and insureds must act in good faith and disclose all relevant information? A) Indemnity B) Subrogation C) Utmost Good Faith D) Insurable Interest Answer: C) Utmost Good Faith Which term describes a risk management strategy where the risk is intentionally retained by the business or individual? A) Risk Avoidance B) Risk Retention C) Risk Transfer D) Risk Reduction Answer: B) Risk Retention What is the main purpose of reinsurance? A) To increase premiums B) To sell more policies C) To spread risk among multiple insurers D) To reduce deductibles Answer: C) To spread risk among multiple insurers Which type of risk is inherent and cannot be eliminated but can only be managed or transferred? A) Pure Risk B) Speculative Risk C) Systematic Risk D) Unsystematic Risk Answer: C) Systematic Risk What is the term for an insurer’s evaluation of an applicant’s risk profile to determine the appropriate premium and coverage? A) Indemnification B) Underwriting C) Subrogation D) Actuarial Analysis Answer: B) Underwriting What type of insurance covers losses due to theft, fire, or natural disasters? A) Liability Insurance B) Property Insurance C) Health Insurance D) Life Insurance Answer: B) Property Insurance Which term refers to the individual or entity covered by an insurance policy? A) Insurer B) Underwriter C) Policyholder D) Agent Answer: C) Policyholder What type of insurance provides compensation to employees who suffer work-related injuries or illnesses? A) Life Insurance B) Liability Insurance C) Health Insurance D) Workers’ Compensation Insurance Answer: D) Workers’ Compensation Insurance Which type of risk involves the possibility of loss or no loss but no possibility of gain? A) Pure Risk B) Speculative Risk C) Systematic Risk D) Unsystematic Risk Answer: A) Pure Risk What is the term for the periodic review of an insurance policy to ensure it continues to meet the policyholder’s needs? A) Policy Evaluation B) Underwriting C) Policy Renewal D) Claim Adjustment Answer: C) Policy Renewal Which insurance principle ensures that the insured is put back in the same financial position after a loss as they were before the loss? A) Utmost Good Faith B) Subrogation C) Indemnity D) Insurable Interest Answer: C) Indemnity What type of insurance covers legal costs and damages if the policyholder is sued for negligence or malpractice? A) Life Insurance B) Liability Insurance C) Property Insurance D) Health Insurance Answer: B) Liability Insurance What is the term for an insurance policy that provides coverage for a specific period? A) Term Policy B) Whole Life Policy C) Endowment Policy D) Annuity Answer: A) Term Policy Which risk management strategy involves not engaging in activities that are known to carry risk? A) Risk Retention B) Risk Avoidance C) Risk Transfer D) Risk Reduction Answer: B) Risk Avoidance What is the role of an insurance broker? A) To assess risk and determine premiums B) To manage claims C) To act as an intermediary between the insurer and the insured D) To provide investment advice Answer: C) To act as an intermediary between the insurer and the insured What type of insurance covers medical expenses incurred by the policyholder? A) Life Insurance B) Liability Insurance C) Health Insurance D) Property Insurance Answer: C) Health Insurance Which principle of insurance allows the insurer to take legal action against a third party responsible for a loss to recover the amount paid to the insured? A) Indemnity B) Subrogation C) Utmost Good Faith D) Insurable Interest Answer: B) Subrogation What is the term for the analysis and evaluation of potential risks that could negatively impact an organization? A) Risk Management B) Underwriting C) Actuarial Analysis D) Policy Evaluation Answer: A) Risk Management Which type of insurance is designed to cover a specific event, such as a wedding or concert? A) Term Insurance B) Event Insurance C) Liability Insurance D) Property Insurance Answer: B) Event Insurance What is the term for the entity that provides insurance coverage? A) Policyholder B) Underwriter C) Insurer D) Agent Answer: C) Insurer Which insurance principle requires full disclosure of all material facts related to the risk being insured? A) Indemnity B) Subrogation C) Utmost Good Faith D) Insurable Interest Answer: C) Utmost Good Faith What type of insurance provides financial protection against claims resulting from injuries and damage to people and property? A) Life Insurance B) Liability Insurance C) Health Insurance D) Property Insurance Answer: B) Liability Insurance What is the term for an insurance policy that pays out a sum of money either on the death of the insured person or after a set period? A) Term Insurance B) Whole Life Insurance C) Endowment Policy D) Annuity Answer: C) Endowment Policy Which risk management strategy involves accepting the risk when the cost of insuring against it is greater than the potential loss? A) Risk Transfer B) Risk Reduction C) Risk Avoidance D) Risk Retention Answer: D) Risk Retention Who is responsible for determining the premium and coverage terms for a new insurance policy? A) Policyholder B) Underwriter C) Claims Adjuster D) Broker Answer: B) Underwriter What type of insurance policy is designed to protect a company’s directors and officers from personal losses due to litigation against them? A) Professional Liability Insurance B) General Liability Insurance C) Directors and Officers (D&O) Insurance D) Business Interruption Insurance Answer: C) Directors and Officers (D&O) Insurance Which term describes the maximum period during which an insurance company will pay benefits to the insured? A) Policy Term B) Grace Period C) Benefit Period D) Elimination Period Answer: C) Benefit Period What is the main goal of actuarial analysis in insurance? A) To sell insurance policies B) To handle customer claims C) To evaluate financial risks and determine premiums D) To manage investment portfolios Answer: C) To evaluate financial risks and determine premiums What type of insurance provides income replacement if the policyholder becomes unable to work due to illness or injury? A) Life Insurance B) Health Insurance C) Disability Insurance D) Liability Insurance Answer: C) Disability Insurance Which term refers to the insurance coverage of a specific type of risk for a specific period? A) Blanket Policy B) Term Insurance C) Liability Insurance D) Specialized Policy Answer: B) Term Insurance What is the term for the amount an insurer charges to provide coverage, based on the risk profile of the insured? A) Deductible B) Premium C) Copayment D) Claim Answer: B) Premium What type of risk involves the possibility of both gain and loss? A) Pure Risk B) Speculative Risk C) Systematic Risk D) Unsystematic Risk Answer: B) Speculative Risk Which insurance principle ensures that the insured cannot recover more than the actual loss from an insurance claim? A) Insurable Interest B) Utmost Good Faith C) Indemnity D) Subrogation Answer: C) Indemnity What type of insurance provides coverage for damage or loss of a policyholder’s home and possessions? A) Health Insurance B) Life Insurance C) Homeowners Insurance D) Liability Insurance Answer: C) Homeowners Insurance